Big Labs, Small Labs - Similar Problems, Different Solutions

Some formerly disparate big and small lab practices are merging due to changing economic trends, new technology, and new outsourcing options. Nowhere is this truer than in hiring.

Hiring

Both big and small labs want to staff their labs with the best available scientists who have the appropriate backgrounds for the available positions. But they have different problems in doing so. Large labs are deluged with applications, many of which come through their websites. Many scientists apply for jobs for which they are not qualified in the hopes that another job for which they are qualified will become available. Even with keyword searching of electronic resumes, sorting though candidates is tedious and time-consuming for human resources staff and hiring managers. Small labs often have the opposite problem — not enough candidates because few people have heard of the firm.

Large companies have historically held the advantage in finding qualified candidates. Their size permits larger recruiting budgets for advertising, maintaining a careers section on their corporate website, and offering on-campus visits. Virtually continuous recruiting by large labs provides economies of scale. In contrast, recruitment is much less continuous for small labs. The need for a new hire occurs and advertising for that job opening is placed. Once the hire is made, proactive sourcing for candidates halts. Intermittent recruitment is more expensive on a per candidate basis. Small company staffing efforts are often geographically limited, notes Dr. Rita Boggs, President of American Research & Testing, Inc.

However, small labs today have the opportunity to gain the same advantages that, until recently, were only economically feasible for large labs. For example, the shift from expensive newspaper and trade magazine recruitment advertising to online job boards represented a major shift in reach for candidate sourcing. For small labs, job board advertising rates were often too steep while the geographic reach was broader than they needed. However, they now have inexpensive advertising available from online sites, such as craigslist.org. Google Base, a massive classifieds database, combines listings aggregated from other sites along with postings which are currently free.

With so many job-hunting scientists in this country on student visas, hiring a new employee often means completing and filing the lengthy paperwork required by the federal government to get the prospective employee a “green card.” Large laboratories have amply staffed human resources departments experienced in doing this. Small laboratories once passed on these job candidates because they had no one who had mastered the lengthy, complex, and costly visa application procedures. Now firms that work on a contract basis provide this service for small labs.

Acquiring expensive equipment

Purchasing or leasing expensive instrumentation and equipment is a financial challenge for managers of both large and small labs. To justify purchases, labs have long used instrumentation for solving plant operational problems in addition to solving R&D problems. However, sometimes this is not enough to keep expensive instruments operating frequently enough to justify the expenditure for their purchase. As a result, both large and small firms have long used contract laboratories to provide analytical and other services when they cannot cost effectively maintain their own capabilities in certain areas.

High throughput screening (HTS) combined with combinatorial chemistry, while significantly enhancing product development productivity, is quite expensive whether the laboratory purchases and operates the equipment itself or outsources the work to a services firm. Hence, it remains primarily the bailiwick of large labs. Originally this approach was used large in pharmaceutical and biotechnology research. More recently, chemical companies have been applying HTS to develop new polymers, such as Dow Chemical’s Versity and Infuse elastomers. Often the development and evaluation of new catalysts using HTS is critical to the development of these new products. For example, Symyx Technologies, a major HTS outsourcing firm, worked with Dow to develop catalysts to produce new elastomers, with Celanese to develop a new catalyst for manufacturing vinyl acetate and with ExxonMobil to develop a new refining catalyst. These research collaborations are not cheap. Dow has a $120 million, 5-year contract with Symyx while ExxonMobil’s 5-year alliance is costing the oil company $200 million.

The broad scope of these collaborations is one reason for their high cost. Still, these sums suggest that outsourcing combinatorial chemistry/HTS, even for smaller projects, is beyond the financial capacity of most small laboratories. Purchasing the equipment needed to run these experiments in one’s own lab is costly. In addition, analyzing the huge amount of data generated in high throughput screening studies requires a lot of expensive computing capability. According to Mike Fasolka, Director of the Combinatorial Methods Center at the National Institute of Standards and Technology, his organization is trying to develop less expensive high throughput techniques. Should these efforts succeed, they may make the technique more affordable for smaller laboratories.

Large labs frequently use simulation software to solve problems in design of drugs and other products, manufacturing process development, modeling the use of their products and services, and modeling the exploitation of natural resources. Modeling problems are as varied as observing drug-molecule interactions with cell enzyme production sites and determining the most efficient production methods for an oil field.

Large laboratories using this software extensively can afford access to the large amount of data processing capacity required to operate such software. Researchers who set up problems and operate the software are specialized and highly trained. Small labs often lack the financial resources for these and may have only intermittent needs for such capabilities. However, some firms that have developed this software, such as Accelrys and Tripos, provide the service of using their software to solve research problems for laboratories lacking the resources to do so on their own. Both the Internet and tradeshows offer an excellent means of identifying firms that provide “software as a service.”

As some larger firms have sold divisions and reduced R&D staffs, keeping their analytical staff members and expensive instrumentation productively occupied has increasingly become a challenge. Firms with large, but under-utilized, analytical staffs and expensive instrumentation have offered their services to other firms — even competitors. Firms taking this approach include DuPont, Shell Chemical, DSM, and ConocoPhillips. Other large firms such as BP are selling under-utilized analytical lab assets to contract laboratories such as IntertekCalebBrett. These contract labs operate the laboratories on the former owner’s premises using staff scientists and technicians who used to work for the original owner. They take in work from other firms to keep both staff and instruments more fully utilized than possible for the former owner.

Meanwhile small firms simply can’t afford some expensive instrumentation and equipment. Some others do not operate this equipment often enough to justify the expense. Their options are to use contract laboratories or nearby university laboratories. Internet search engines have made it easier for small labs to find providers of these services.

Safety and regulatory matters

The scope of workplace safety and environmental regulations (their complexity and reporting requirements) continues to increase. Economy of scale permits large labs to maintain adequate numbers of well-trained full-time staff members to comply with these regulations. Formerly, the primary option for small companies was to have people handling these matters who also had other job responsibilities. Now a wide variety of outsourcing options are available to small labs to deal with this problem. Some firms, such as Northwest Hazmat, Inc., provide spill response services. Others such as 3E Company offer online regulatory compliance tools. Organizations such as Lab Safety Institute and Advanced Chemical Safety provide laboratory staff safety training.

However, the resources of large labs continue to enable them to deal with issues that small labs often cannot afford to address. For example, large laboratories such as Shell’s Westhollow Technology Center have people trained in ergonomics to assist employees with individual laboratory and workstation design. At many small laboratories this is done, if at all, on an informal basis.

Intellectual property concerns

While most (but not all) large firms operate their own legal departments to deal with patent and other intellectual property matters, small companies find it more cost effective to hire law firms to handle these matters. Again, the issue is staff utilization. The many researchers at a large lab can generate a constant stream of invention disclosures to be turned into patent applications that are prosecuted to obtain domestic and international patents. Matters, such as monitoring and paying patent maintenance fees and pursuing licensing options, must be dealt with. In contrast, smaller labs generate only an intermittent flow of invention disclosures. Smaller labs, usually affiliated with smaller firms less international in scope, may pursue fewer foreign patent filings. All this means that many small firms often cannot keep a patent attorney sufficiently busy to justify having one on their own staff. As a result, this work has long been outsourced.

Intellectual property concerns are becoming of ever greater interest as both large and small firms try to find profitable uses for their technology besides commercializing their own new products and process. New firms are springing up to match technology holders with firms interested in licensing such technology for various uses. These include yet2.com and NineSigma.

Reducing operating expenses

Both large and small laboratories are reducing operating costs by outsourcing support operations such as janitorial services. Due to their larger scale, it often makes more sense for large laboratories to outsource operations such as mailroom services than it does for small labs for which the scale of support needed is too small to interest an outsourcing firm.

Some large labs are outsourcing more sophisticated services such as mechanical and electrical support of their pilot plants and laboratories. Some large labs also outsource library and information science support services and graphic services to firms such as Kellogg, Brown, & Root and Pitney Bowes who operate facilities on the large laboratory site. Small labs also frequently outsource these services but often the providers do not routinely operate on the lab site.

Operating under-utilized labs

Besides strategies dealing with under-utilized analytical laboratories mentioned above, some large laboratories have considerably more space than they need. This has become a problem for many large labs as their corporate parents reduce R&D operations. The still-operating portions of the laboratory must cover the overhead expenses for the vacant lab space.

Some large labs have dealt with this problem by filling vacant lab space with tenants. For example, since the early 1990s, Shell Chemical has sold about half their chemical businesses substantially reducing the need for lab space at their Westhollow Technology Center in Houston. Much of this lab space is now rented by the new owners of these businesses such as Dow Chemical, Hexion, and Kraton. Some government laboratories such as the Marine Biological Laboratory (Woods Hole, MA) also rent lab space. This practice is becoming global. Solvay operates as a laboratory incubator for start-ups at its Brussels’ laboratory. Some universities, such as the University of Albany and West Virginia University, have built incubator facilities near their campuses for small start-up firms. These firms are often based on the research of university faculty members.

Whenever two or more firms operate research labs in the same building, they must set up programs and procedures to protect the security of their intellectual property.

Wrap-up

The difference in the scale of their operations and (usually) in their financial resources means that large and small labs often must solve similar problems in different ways. Business trends and online technology have provided both new solutions and increased access to them by both large and small labs. No doubt the skills of managers of both large and small labs in dealing with the challenges outlined above will continue to evolve.